Quote from Evan Mills
“1.6% on $500,000 is about $8,000 per year, not including fund expenses, trading costs or associated taxes. With a target return of 5%, the fee alone is almost a third of the gross return, so it’s a pretty high hurdle. The more important question is not whether you can afford the fees, but whether the advice is valuable enough to justify giving up 1.6% of the portfolio every single year, and that number is going to grow as your portfolio grows.”
— Evan Mills, Financial Advisor, Scholar Advising
Key Takeaways
A fee should always be measured against the return it’s attached to, not viewed in isolation. A 1.6% fee sounds modest until it is compared with a 5% target return, at which point it represents nearly a third of the expected gain. Understanding this ratio, rather than just the percentage on its own, gives a much clearer picture of what an advisor’s cost is actually doing to a portfolio’s performance.
Percentage-based fees grow in dollar terms as a portfolio grows. A 1.6% fee on $500,000 is roughly $8,000 a year today, but that figure rises right alongside the account balance over time. Investors should think about what a fee will cost not just now, but over the full arc of a retirement timeline.
The right question is value, not affordability. Whether someone can technically afford a fee is different from whether the services received are worth that cost. A fee only makes sense when it is tied to a clear scope of work, such as comprehensive financial planning, tax coordination, or estate planning, rather than investment management alone.
A target return is an expectation, not a guarantee. Portfolios built around a specific return assumption can still lose money in any given year, regardless of how the fee is structured or how skilled the manager is. Retirees and near-retirees in particular should evaluate a portfolio based on what it needs to accomplish for their actual income and liquidity needs, not on a projected percentage.
Matching the portfolio to personal circumstances matters more than chasing a number. Risk tolerance, income needs, and time horizon should shape a portfolio’s structure well before any conversation about fees or target returns begins. Especially later in life, a disciplined approach that accounts for these factors tends to serve an investor better than optimizing for the highest possible return.